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NARA [144]
3 years ago
6

Pinnacle Enterprises is expected to have next year’s free cash flow of $14 million. FCF is expected to grow at 5% per year into

foreseeable future. Pinnacle’s cost of equity capital is 15%, cost of debt is 8%, and it is in the 40% corporate tax bracket. Pinnacle currently maintains a 0.4 debt to equity ratio. What would be the value of Pinnacle as an all equity firm would?
Business
1 answer:
marishachu [46]3 years ago
6 0

Answer:

If Pinnacle was an all equity firm its WACC would be the same as the cost of equity capital which is 15%.Also if it was an all equity firm all the free cash flow would be available to the shareholders as there was no debt and no money needed to be given to the debtors

The formula to find the value of a firm using the FCF is

FCF*(1+G)/WACC-G

14*(1+0.5)/0.15-0.5

=14.7/0.10=147

The value of Pinnacle as an all equity firm would be $147 million

Explanation:

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7.The matching principle requires that: A. revenues earned and expenses incurred in generating those revenues should be reported
dem82 [27]

Answer:

A. revenues earned and expenses incurred in generating those revenues should be reported in the same income statement.

Explanation:

A matching principle is an accounting concept which is typically used on accrual basis accounts and it states that expenses incurred by an individual or business entity should be recognized and matched in the same period with respect to the revenues they are related to.

The matching principle indicates when costs are recognized as expenses on the income statement.

For instance, company XYZ purchases a property worth $90,000 in June, it was then sold in July for $250,000. Based on the matching principle, the $90,000 cost shouldn't be recognized by company XYZ as an expense until July, when the related revenue would be recognized also. Else, if recognized, its expenses would be overstated by $90,000 in June, and consequently understated to the tune of $250,000 in July.

Hence, matching principle requires that revenues earned and expenses incurred in generating those revenues should be reported in the same income statement.

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According to my observation, The shareholder meeting was scheduled to discuss the issue of increasing the limit of minimum wage per hour for the employees.  It is different from other shareholders' meetings has it was only conducted to improve the strong market value of the shares.    

Explanation:

The employees of the Wal-Mart organization pinpointed their issue to the higher level hierarchy level management. They addressed the issue of about demanding the larger ceiling for the minimum wage up to $15 per hour. It was fixed as $10 per hour for the employees.

The management also realized the need to ensure economic support for the common employees. So they conveyed the decision of increasing the minimum support wages up to $15 per day in shareholders' meetings held recently. So it was considered as the different one from other held meetings.

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